tv Bloomberg Technology Bloomberg April 17, 2019 5:00pm-6:00pm EDT
emily: i'm emily chang in san francisco. this is "bloomberg technology." the tech ipo boom rolls on, zune video and pinterest preparing for their debut, but will investors hit the brakes or move full speed ahead after the lackluster review of lyft. the qualcomm stadium it -- w wille settlement -- no
the five d device come to market? running forfounder president of taiwan, saying he is following the call from a chinese sea goddess. if he wins, where does that leave his company? to our top story, to more tech unicorns are going to the public market on thursday and a social media discovery company pinterest and zoom, both expected to price their shares on wednesday. joining a rush of tech companies going public this year. according to the wall street journal, pinterest is targeting $19 a share, $2 above the high end of the range, but like other big names they are burning through less cash. pinterest could see revenue triple by 2022, meantime zoom is a rare type of unicorn, a profitable one. our senior analyst are
here to discuss. what are the prospects for zoom and pinterest as you see them? >> zoom is something we do not see often, which is a company that has earnings per share. so that is obviously very good, but it also has fabulous growth and it is already at skill. usually, these companies are really small, submitting we see when we look at zoom is showing it will be a rocket and it will trade way up tomorrow. as far as pinterest, it is fine. our score was above average when you compare it to snap, and it is sort of on its way to break even. it has user growth. and it already has a scale. so we are hearing that deal is in fine shape and will price at or above the range. emily: that said, pinterest is doing a flat round. it was aiming below what it raised in the private markets,
is that smart? >> given what we saw happening with lyft, and if you look at the history of ipo's, the first six months, the first days of craziness has been consistent. at lease they are setting their expectations in line with what they can deliver on growth. you look at the growth prospects of this company, if they are able to jump over these obstacles, they could triple revenues. emily: what are the near-term hurdles? >> there are three of them. how they scale their revenue right now. it is a self-serve platform, the platform they need to scale chasingdepends on sales large advertisers. it will take about a year to transition into that. snap already has. then you have google with key landing pages for pinterest, that affects user growth. it happened at last year, that could play a role here. but the main thing is the average for users is about $3,
compared to $8 for twitter. so they would need to push advertising in front of the retail audiences. emily: pinterest has been trying to distance themselves from social media, so what is pinterest? is it social commerce discovery, what bucket would you put it in? rett: the way i would define it is social requires somebody else on the other end to interact with you and you can interact with pinterest without that. it is a way to interact with the world. so i think that comparison is actually fair, the content does not come from other users, it comes from the internet at large. for all kinds of reasons there are, it is obvious why somebody would not want to be caught a social network right now at this point in 2019, so that also makes sense. emily: there are risks around privacy, is that a concern for pinterest, the misinformation, an ad-based network with maybe a
different structure than others? >> the point was made, because the content is not user generated per se, everybody is making a wish list, things they want to buy down the line. if you look the searches on the platform, which is going to become a key metric for the company, most are unbranded. so they do not know which brand to buy. you marry this repository of things i would love to buy to brands they would love to sell to them, so that creates a unique story where it is more about user engagement, less about user growth, and that metric would be sustainable because of that. emily: talk about is him. -- about zoom. who are their main competitors? you think about polycom. who are they potentially unseating? rett: that is a reason they scored high with us.
from the perspective of new companies, compared to the old platforms, they kind of own the space. zoom meetings are a thing. it is like ubering. they have taken it up like skype did. one thing we like about them is they seem to have the category to themselves. as far as the business is concerned, we think it comps to dock you sign. it will be a little more expensive, but the growth and profitability make it make sense. but you should have this space to yourself, unless one of the big guys like google gives this product away. emily: both companies are looking at maybe a $12 billion valuation, do you think there will be competition between them on the day? are investors going to be attracted to one or the other, could there be a split? rett: investors like to make money, so there is room to buy both. everything we hear is these deals are both in great shape. zoom will trade well.
investors like the pinterest story. . and pinterest is priced right. you look at what pinterest is doing relative to what snap did, they are raising half as much money with twice as much revenue, so it is a very attractive valuation story and the dynamics should be good. emily: it may appear to be priced right. when you saw lyft go above its pricing range on the initial trading day, huge pop, now the shares are below their ipo pricing, so could we see that same thing happen with pinterest ? where there is a perception that the price is right, but a few days into the investors change their minds, or there is short interest or something else? >> if you have seen the history of ipo's, this happens. it happened with facebook and alibaba. it is more about supply and demand. things like that.
yes, volatility could happen. but if they are able to jump through this and deliver good results, they can sustain a high valuation. emily: rett, you came out critical of the numbers lyft was pointing out, saying there was not enough to make a complete financial model. now that you see what uber has put out, do you think that uber will suffer from the same problems as lyft, or is it a different story? was kind ofyft did offensive to some people. when you do it they did you have an obligation to explain how your profitability story is going to improve. uber is losing $3 billion on $11 billion in revenue, and it is a much bigger company. i think that their disclosure was better than what was put for to buy lyft. the metrics are much more significant than what we heard from lyft. they broke out bikes and
scooters, among other things. but i think price will be -- isant in how that uber perceived. emily: ok, thank you both. investors are cheering intel's decision to hang up on the 5g modem business, sending shares to the highest level since 2000. apple's settlement with qualcomm means they lost a significant customer in the smartphone market. and until says it will wind down its multibillion-dollar bet on 5g, but it will look at whether existing chips and 5g modems can be used in personal computers. investors are cheering they do not have to spend that high price. coming up, shares of qualcomm surging after their settlement with apple. what does it mean for the rest of the chip industry, next. and if you like bloomberg news, check us out on the radio, listen on the app.
jumpedqualcomm shares 12%, continuing a rally of a 40% after announcing a settlement with apple and assigning a deal for royalties to end a bitter dispute. the agreement could be a big deal for the entire chip sector, raising hopes of a 5g iphone in 220. we have some guests to discuss. including an analyst from sanford bernstein. this leads to many questions
about what happens after six years, the term of this agreement, and what does it mean for the rest of the chip industry given this model has been frustrating not just for apple but for other manufacturers? >> i think that is the takeaway for us from this, more than the monetary settlement. it is the fact that qualcomm's business model as an intellectual property license is validated in the fact that its ip can now be monetized well beyond the value of the chips themselves, through the value of the device. and i think when you get somebody like apple to validate that business model, that is a strong statement. so that is the big takeaway for us from this, even beyond the economics of it. in the grand scheme of things, we believe that apple is on its way to build its own modem, the question is how far will that be and what will the economics of
that be, and what will the royalty structure be after that. that is to be determined. we always thought until was a placeholder for apple. and that with 5g qualcomm regains its place back in the iphone. but in the long run it is going to be an apple cellular-based chip in there. emily: what is your take on how good of a deal this is in the short and long-term? stock look, this is a that has been viewed as uninvestable by most investors for going on five years now. if you look, the stock here today is only up in line, and after five years it is down. it is down over the last five years. this is huge in the sense that with the legal overhang gone, the fundamental investors may be willing to do work on it now,
which has not been true for many years. at the same time, there's a lot we do not know yet. about twoy guided dollars in upside from the steel, we do not know how that will split up between licensing and chips. it seems like they have validated the model in terms of royalties on the device, but we do not know the actual dollar royalty. and to the point i heard earlier, the chips agreement, how long does it stay with qualcomm -- the licensing agreement is six years with maybe a two year extension. with chips they said it was multi-year, they did not give numbers, so that brings up the question of what apple's plan may be three years out. obviously, intel is not around right now, but in three years the overall environment will be tougher than it is now and we will see how far along apple is on their own efforts at that point. for now, investors may want to buy this. my guess is they will grind up
into earnings, which is in a week or so, and then qualcomm will talk and we will see what they say and what they don't and we will see with the stock goes from there. emily: apple has been focusing on making its own chips. what do you think apple's game plan could be longer-term? anand: if you look at the value of the chips within the iphone, the application processor, which is homemade. if you look at the motion processor, that is homemade. the wi-fi chip is third party. standpoint,rtant that is a very high and a reasonably high dollar value. that is also external. so i think that to some degree apple wants to control the elements that are high intellectual property and also determine the cadence with which it can launch critical new features in the iphone, but at the same time it does not want
to make commodity chips or have control over that when it can be easily and cheaply purchased by third parties -- from third parties. that is the decision they may use to determine whether they want to make chips in-house or it wants to source it from third parties. i think control and cost are key elements of that. but stacy makes a good point, which is just because the deal is done and qualcomm becomes an investable name again, it is not like all the problems in the underlying market are going to vanish. it is not hunky-dory in the market. it might be hitting a sort of threshold of unit growth and sizing and saturation, etc. and qualcomm is disproportionate in the market, as much as they want to expand their presence in other devices. so there is good with the bad. and i think that this provides
an equitable sense of relief to investors, but it does not take away all of the issues with the underlying market. curioustacy, i find it qualcomm has a such a stronghold still on five g technology. -- on 5g technology. do you expect that to continue, that no other company can do it as well as qualcomm? stacy: we have samsung who issue be modems, we have huawei, intel obviously exited, the last in a long line of those to exit. but qualcomm is in the lead. they were even in the lead on 4g. but remember, on 4g things were very good at the beginning of that cycle for a few years, then it collapsed as competition became good enough. 5g we may see something similar. it will probably be a few years,
i do not know if anybody will be better than qualcomm, at some point there is always a line that is good enough. and there is one other difference between 4g and 5g. 4g was the reason to go out and buy a smart phone, so not only do we get a good amount of asp upside as that transition happened, but we got a ton of unit growth. but with 5g, i do not know if we get that. the smartphones are saturated. 5g will be more of a replacement market, that means the upside for qualcomm is probably from chip content and chips at asp 's, rather than unit growth. once we have apple back in the mix, i do not know if we will get the growth we had the last cycle. that is one difference. asgon and, stacy r anand, we will be watching to see how the chip industry response. coming up, tictoc's time in
bytedance. mark has been reporting on this story. it is interesting the indian government has intervened here, whereas other governments have not, in an app that has been concerning to a lot of people because you have a lot of children on the app. and concerns about sexual predators. mark: it is interesting on multiple levels. we have done great reporting out of asia, that india like other countries, are adopting more of a chinese model of regulating the internet, so becoming more severe. and they are going after india, with fairly conservative politicians, and going after a chinese company right now. they claim to have 120 million active users each month and they have grown like being busters. -- gang busters. they have a huge presence also in the u.s. a.i. company that
prides itself onits its ability -- on its ability to take down content quickly. emily: they say that they are optimistic about an outcome that will be well-received by 120 million active users in india. i mean, the concerns are disturbing, concerns about being dangerous to children, exposure to sexual predators, porn -- how is this different from youtube, where a parent can upload a video of their child and who knows what happens to it? mark: they say that no kids under 15 watch their videos, according to the terms of service. so right now, tiktok had a aroundfine, a collection privacy concerns. so the same kind of advocacy groups are asking for lawmakers to look at youtube in a similar way. emily: i want to ask about the notre dame situation. obviously, a devastating story watching notre dame getting
burned out. and in the middle of that, on youtube, this box pops up that labels the burning of notre dame as 9/11. what happened? mark: youtube said it was a wrong call through algorithms. but the best we can decipher is the image or condition technology saw a picture of a burning facade and the software determined it looked like an image of 9/11. emily: but there could be a lot of burning facades. mark: totally. youtube over the years has been hammered for pushing conspiracy theories, like 9/11 was an inside job, so this is a precaution they are taking. it goes back to the point of tiktok, this chinese company prides itself on artificial intelligence. google is the world's leading a.i. company, but it is not perfect at solving this problem
and both companies will point to their scale as saying we cannot have humans look at this. 500 uploads a minute, so even if you had humans at looking at that -- this is an agency case, you would think somebody in the company would say, let's look at the videos around it are dom. -- aoround notre dame. but they are still relying on machines and software right now. emily: and having to find a balance between what machines can do and what humans can and should do. mark, thank you. coming up, and a flex reported an underwhelming second quarter forecast, but the ceo says he is confident new services from disney and apple will not slow down their momentum. we will discuss. and we are live streaming on twitter, follow our global network tictoc on twitter. this is bloomberg. ♪
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emily: this is "bloomberg technology." i'm emily chang in san francisco. netflix may be paying the price for raising the price. the service projects it will add only 5 million new customers in the current quarter, short of a forecast. they have blamed the slowdown on raising prices in the u.s. and parts of europe. and incoming cup edition from disney, apple and warner media. joining us is nick nelson in los angeles. the former head of product creative at netflix. and also with us, our guest from
"bloomberg intelligence." 24 hours later, what are your thoughts on the q2 forecast combined with comments from reed hastings that momentum is phenomenal and this coming cup edition will not be that much come petition because there is already competition. >> absolutely. yes, the subscriber guidance was disappointing, but factor in the seasonality, factor in the churn, as well as the fact there is a limited content slate in q2, i do not think investors have much to worry about. the metrics are on pace for a record year in terms of subscriber additions, and that is because of the strength of the slate in the second half, you will see the megahits returning and coming back to the service. in terms of competition, netflix pretty much downplayed the stress of disney plus, of warner
media and all these other new services that will enter the market. what they said was thanks to this global shift in streaming, what we see is the internet, internet television is growing at an exploding pace and netflix is any position to grab a bigger share of the market. emily: we will take a listen to reed hastings and his exact words on competition. this is from the conference call. ofd: we only win 2% downloading on mobile. 90% of the time they are not watching netflix. so there is a ton of competition out there. disney and apple at a little bit more, but frankly i doubt it will be material. emily: as somebody who used to work at netflix, do you buy that argument? nick: i do. because of internet access across the world and across
populations, the overall consumption of content, the pie is growing and netflix is doing a good job of capitalizing on some of that, but i think the market is far from saturated so there is room to grow. emily: how much competition do you think disney plus, which has a huge existing library dating back decades, will actually be for netflix? nick: in terms of the content library that disney has amassed, it is definitely competitive. it is also legacy content, so it is not just about the catalog you have to offer, but the content you have continually coming to the service. their slate in netflix is going to be stronger for the second half of the year and continually having the content added on top of the value already produced by your library is supercritical as well. i think that disney is obviously very good at continuing to have a great drip of strong content and that will provide a lot of
competition to netflix in the overall marketplace. emily: on the call, reed hastings indicated, as well as other executives, that they were looking at a lower tier of pricing. disney will be $6.99 a month. apple, we do not know the price yet. but how will a lower tier impact the company, could it cannibalize the existing service? geeta: i think it will work well in emerging markets where you have more mobile subscribers. they are looking to expand in india, where you will have over one billion smartphones in the next three or four years. and the road question is how do reallypitalize on the explosive growth of broadband in that market. right now, they have made a big bet on streaming in india. they are creating wonderful content. and disney is actually quite
formidable in india because it has about 300 million users on their other platform it acquired with fox. so it makes sense for them to go after, like, maybe introduce a $ 3 monthly plan in these emerging markets. emily: i am curious for your thoughts on content. netflix has put billions into original content. much of disney's original content is based on existing hit franchises and movies, like star wars films for example. there is some original content, but it is often based on these legacies that have performed well. is that really going to serve disney well going forward, given that the hit shows today are completely fresh, whether it is "game of thrones," or "the big bang theory." nick: that is an obstacle for disney to overcome. given the competitive landscape,
i think what i would characterize as overspend, they are spending forward for the consumer base they will have come up and -- they will have, as well as spending to build brands and contents that do not exist. so disney has a competitive milestone to overcome in terms of data collection to help inform what they should produce, will content they should be buying, and what brands they should be building to remain competitive. emily: but do you likewise think netflix can keep up? their hit shows, like "stranger things," they are not as big as "game of thrones." netbooks is making almost too much. nick: i think of it like a hit and non-hit ratio. netflix does not have to have everything do really well, because they are rapidly expanding, they are getting global subscribers, so they have some leeway right now. but one of the biggest things
that will define their success is making the ratio improve so more shows are hits, are brand building. one thing to consider is something you could could could -- could characterize as a miss. small groups of users all over the globe, so they have a little bit more variances they can absorb right now as they learn to be about to create better content over time. emily: ok. netflix.on, former and geetha. this race is a fun one to watch. the billionaire founder of the company that assembles iphones plans to run for president of taiwan. terry gou will see the nomination of the opposition party. he says a mythical sea goddess encouraged him to come forward to support peace with china, but what would it mean for foxconn? we have dennis wong, from sam
houston university, joining us from new york. and here we have brad stone. so, he is clearly positioning himself as pro-china, even with this initial announcement. what does this mean for foxconn? >> you do not have to consult the sea goddess. it is probably not great. he is a legendary business figure, he is impetuous, controlling, really synonymous with foxconn, that makes the devices we all hold in our pockets. you know, everything i know about foxconn i have learned from our taiwan reporter, and she has written about how he has destabilized the -- question. if something happens like what happened in 2010 with a suicide chinese factories community day terry gou to leave foxconn through that. but then on the other hand i think of donald trump, how he is not day-to-day, but he has sat
in the shadows running an empire. so i do not think he would completely give up his control of foxconn. >> i want to mention it is not crazy to have like a sea goddess to support him, because given the time when society is -- it root for chinese society, so it is an interesting move for him to make an announcement like that. emily: talk about the strategy, some people will like he is pro-china, but it could be a disadvantage given the fragility of that relationship. dennis: indeed. for taiwanese voters, terry gou is actually a figure that indicates someone capable of taking care of their economy and economic growth in taiwan, so people expect him to provide a real solution for the current
economic stagnation. so to a lot of supporters it does not matter if terry gou is very pro-china or not, they look yt the pragmatic way -- the look at him as a very pragmatic businessman who can provide solutions. but of course the disadvantage is, this is too close to china and there is concern about his relations with china. whether terry gou really got elected, whether he will be a good communicator and negotiator, or he will become subordinate to china. emily: brad, he does have to win in the primaries, but if he leads, what would that mean for apple? brad: apple is foxconn's largest client, china is the third-largest market for apple. and when they had to change their sales estimates, revenue estimates in the force quarter -- first quarter, it was because
of china. so terry gou moving to the leader of taiwan, that could have good implications in terms of apple's access to china, perhaps bad if there is a question about taiwanese independence. if that makes it back in the silicon valley, where employees are paying attention to these political issues. emily: given the other competitors, how do you expect this campaign to play out? dennis: the current ruling party, dpp, is experiencing low popularity due to some would argue a poor performance. they do have strengths in terms of improving relationships between the u.s. and taiwan. in recent years, we have seen this strengthened in terms of the congress bill that passed, the taiwan -- the asian reassurance initiative and the
taiwan travel act is definitely an improvement between taiwan and the u.s. however, the economic growth, as i mentioned to, the economic stagnation is hurting the ruling party. so i would say the current political climate, the situation, it is very -- it is not very good. it does not look bright for the ruling party. so that is also the reason why there are so many competitors, or candidates, from the opposition party, who are willing to run for the 2020 election. emily: fascinating. bradssor dennis wong and stone. coming up, a breakthrough in modern medicine. an experiment gene therapy that has cured eight infants with the bubble boy disease. we will bring you all of the details, next. this is bloomberg.
emily: an experimental gene therapy has cured eight infants with the so-called bubble boy disease. the disease, named for the isolation that has affected children, were once kept in. researchers in memphis developed a one-time treatment to correct the defect and were able to build immune system's in these infants. joining us to discuss is rick shine. everybody loves a medical breakthrough. what exactly happened here? rick: right. you know, it is a great upbeat story in a time when the news is not so upbeat these days. and some researchers at st. jude's research hospital came up
with a very unique and a new way , almost entirely boys, who have this immunodeficiency. this was a something tried it with some success 20 years ago or so by some companies and research institutes in europe, but those children back then always developed leukemia. now with a new kind of system that st. jude's and a company that is licensing the technology hopes to use, leukemia is no longer a worry. emily: i am looking at the chart wasustang bio, which involved in the treatment for this disease, the shares are up more than 180% right now, more than 200% after hours. you know, these young boys have already been released from their isolation, so at this point this seems to be failsafe.
what does this mean for the company and the industry? rick: it is very promising for the company. the thing to remember is, you know, the news today is based on the results of eight very successful treatment results of kids that were treated by st. jude's. now, the company is planning on doing additional research and testing in the hopes of getting fairly speedy fda approval. how long that will take is still to be determined, of course, but that said, you know, the results are extremely positive. and the company is extremely enthusiastic that this will hve a good result -- have a good
result for them in terms of fda approval. emily: it is great to hear some good news, certainly miraculous news for these little boys and their parents. rick, thank you so much. coming up, electric cars taking china by storm. there are over 486 ec manufacturers in china, more than trouble the number two years ago. and their sales are projected to reach a record 1.6 million units this year. but is this sustainable? tom mackenzie spoke with the founder of neo at the shanghai auto show. i have confidence in the chinese automobile market in the do notrm, but dii expect sales to grow like they did in the past. in general, the sale of new cars will be lower, but the intelligent ev car market will be the fastest-growing segment.
they have rolled back subsidies -- tom: that has hurt some in the sector, so what do you think the impact is you are seeing and what is the longer-term consequence of this? haveam: the subsidies decreased, but they are still there. on the other hand, the federal tax rates in china are good for the ev market. there are benefits of using ev cars, such as lower consumption taxes, a beneficial license plate policy, and no restrictions like in shanghai and shenzhen. they will prove to be more sustainable in the long-term. tom: what is the biggest hurdle facing neo at this stage in the business's development? william: how to enhance operational efficiency, how to increase gross profit, and how to increase our sales have always been challenges.
in addition, there is a challenge of how to raise funds to pay for more r&d. those are things our team needs to be focused on. tom: there is expectation that there will be a significant shakeout of the electric vehicle startups in china, how deep do you think that shakeout goes? how many companies will have to be closing up? william: i believe there will be some companies than can survive, just like startups in other areas there will not be success for every single company, which is natural. tom: tesla is expected to start producing vehicles in 2020 in shanghai, does it change your strategy? william: we will not change our strategy based on what tesla is doing in china. the auto market is huge. tesla is a great company and it has many good ideas to help advance of the industry. we certainly have are good ideas too.
emily: to the future of video streaming with new offerings from powerhouses like apple and disney, we spoke to someone who has decades of experience in the entertainment industry. in the latest episode of studio 1.0, i sat down with the former dreamworks ceo, jeffrey katzenberg, about his new streaming service and his storied hollywood career. jeff: i think it is early in the game to be calling winners and losers in something that is almost cataclysmic
transformation, where virtually every other day or week there is something that is a tectonic shifting of the plates. it is a little bit hard when you are in the center of that storm, to have perspective on it. it will be the winners? the winners will be the ones with the biggest and best businesses, you know, and have the greatest leaders. and so you cannot help but look at and admire what bob iger has done. emily: i was going to say, is disney one of those companies? jeff: 100%. h has made one of the most ambitiouse bets anybody in modern business has ever made. they are the number one company today as an entertainment media company. without peers. they have the best franchises and ip. he decides that his -- the future of that enterprise, of which he is the steward at the moment, he actually has a good deal of humility about it.
he realizes he is going to run with the baton and pass it at some point. and he decided after 12 of the most spectacular years as ceo, he is pushing all the chips in to say for this company to have as great a future as it has a past, he has to transform it. bet on bob iger. emily: would you bet on reed hastings? jeff: 100%. i would bet on steve burke and brian roberts. i would bet on at&t. these are phenomenal enterprises, great leadership. they are all going to be, in some fashion or form, it is not clear what it is yet, but they will all come out with some win. emily: do you think content is a stoking -- is still king? jeff: no. emily: what makes a king or
queen? jeff: content is king maker, but clearly today platform is the king. and i mean netflix is a platform. its content has made that platform successful. worthe platform itself is $200 billion, though the value of that enterprise is far greater than the content, but without that content they would not be king. emily: my conversation with quibi founder jeffrey katzenberg . watch it tonight. that does it for this edition of "bloomberg technology." of course, we are always live on twitter. follow our global news breaking network on tictoc. this is bloomberg. ♪
>> welcome to daybreak australia. i am shery ahn and bloomberg's world headquarters in new york. sophie: we are counting down to asia's major market open. haidi: these are the top stories we are covering. u.s. stocks fall to a one-week low as the latest results did little for confidence in the economy. health care led the declines. the u.s. and china are said to be scheduling new trade talks with top